SAN FRANCISCO • Facebook has seen the first signs of user disenchantment in the midst of public scandals over privacy and content, with second-quarter revenue and average daily visitors missing analysts' projections.
Chief financial officer David Wehner said sales growth will continue to slow through the rest of the year. Shares, which lost about 7 per cent in extended trading on Wednesday, fell as much as 23 per cent after Mr Wehner's comments on a conference call with analysts.
Facebook's first financial stumble in three years followed a quarter in which data-privacy issues came under harsh scrutiny, with chief executive officer Mark Zuckerberg testifying before US Congress on the company's missteps. The period was also marked by Europe's implementation of strict new data laws, which Facebook said led to fewer daily visitors in that region. And the company was bombarded by criticism over its content policies, especially in countries such as Myanmar and Sri Lanka where misinformation has led to violence.
"The core Facebook platform is declining," said Pivotal Research Group analyst Brian Wieser.
Revenue, fuelled by mobile advertising sales, rose 42 per cent to US$13.2 billion (S$18 billion) in the quarter, Facebook said. Analysts had projected US$13.3 billion. The quarter marked the first time Facebook had missed analysts' revenue projections since 2015.
"We expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4," Mr Wehner said on the call. Facebook sales increased 47 per cent, year over year, in both the third and fourth quarters, of 2017.
Facebook said it had 1.47 billion daily active users in June, against the 1.48 billion average of analysts' estimates compiled by Bloomberg. The company's user base was unchanged in its biggest market, the US and Canada, at 185 million daily users, while declining in Europe to 279 million daily users. Overall, average daily users increased 11 per cent from the period a year earlier.
Facebook's shares had gained 23 per cent this year.
The company posted net income of US$5.11 billion, or US$1.74 a share, against analysts' average estimate of US$1.71 a share, according to Bloomberg-compiled data.
The social network still holds one of the world's most valuable sets of data on what people are interested in, and makes that audience easily available to advertisers. But its ad growth engine contended with disruptions in its most lucrative markets. In Europe, Facebook had to respond to new privacy rules. In North America, an effort to get all political advertisers to verify their identities may have halted some purchases as the company worked through its broad definition of what is considered "political".
Facebook remains in a dominant position in mobile advertising alongside Alphabet Inc's Google. Facebook said mobile made up 91 per cent of ad revenue in the recent period, compared with about 87 per cent a year earlier.
The company owns three other properties with more than one billion users: Instagram, WhatsApp and Messenger. Instagram likely contributed meaningfully to the company's revenue, analysts said, though Facebook does not break out sales for the app.